The Consumer Price Index increased at an abnormally high pace of 8.5 percent. The potential market for an immutable asset like bitcoin, which has a finite quantity, is in excess of $100 trillion.
We just got statistics from the United States Bureau of Labor Statistics for March inflation, which came in at a scorching 8.56 percent year over year (marginally above the 8.4 percent consensus). Treasury markets have continued to sell-off, with the 10-year yield climbing to above 2.7 percent, up from 1.5 percent at the start of the year.
Together, the rising inflation rate and the 10-year treasury rates form what we believe is the most significant macroeconomic picture at the moment. We are still in the midst of a period of financial repression, with inflation running magnitudes ahead of bond yields, guaranteeing losses for investors who depend on these risk-free rates.
Even if CPI peaks this month or in the following months, we anticipate inflation to remain high throughout 2022 and into 2023, well above the 2% inflation goal and the 10-year treasury return.
On a month-over-month basis, the overall CPI increased at its fastest pace since 2005. Core CPI, which excludes energy and food and is more carefully monitored by the Federal Reserve and markets, has decelerated month over month, suggesting that certain inflation components may be turning over. core CPI came in at 0.32 percent month over month, below the average estimate of 0.5 percent, prompting a small rally in the bond market.
Ultimately, the antidote to rising prices is an increase in prices. At some point, chronic inflation overwhelms consumers and their wallets, resulting in a far larger deflationary effect.